Two ways to measure the horse race among the AI public-company market leaders. They can be at least partially handicapped by the large private companies, OpenAI and Anthropic. In every sense, in terms of market value, Meta (NASDAQ: META | META Price Prediction) has lost ground, particularly as measured by market cap. This yardstick is even better than stock price movements, because it shows how, ultimately, investors look at the AI race for supremacy. However, it misses one of the most important factors. How will the stream of incredibly impressive Chinese products affect the entire US industry?
Admittedly, the market cap measure has one other weakness. It ignores the key legacy businesses these companies are in. In Meta’s case, it is social media. In Microsoft (NASDAQ: MSFT), this is cloud computing and operating systems. Amazon’s (NASDAQ: AMZN) legacy business is e-commerce. However, today, based on the valuation of AI prospects, these legacy businesses seem less and less important. AI is that big of a deal. That assumes AI is the largest advance in technology history, or even mankind’s most important invention.
The value of the AI pure-play companies is instructive. None of their market value is based on any legacy revenue. On that basis, these valuations are remarkably high. OpenAI CEO Sam Altman has pushed for a $1 trillion valuation as it prepares for its IPO. In the minds of many investors, it has lost its position as the most valuable private AI company. Its revenue growth has slowed compared to rival Anthropic. Most recently, OpenAI’s revenue annual run rate sits at $40 billion (depending on who is talking). Anthropic’s is closer to $65 billion. The Wall Street Journal reported that “OpenAI’s Second-Quarter Sales Show Tepid Growth Compared With Anthropic.” Anthropic’s value has been touted as being close to $2 trillion.
Meta’s market cap is $1.39 trillion, which could put it behind Anthropic. Amazon’s market cap is double Meta’s, at $2.87 trillion. Microsoft’s is $3.60 trillion. And Alphabet’s (NASDAQ: GOOG) is $4.19 trillion.
Meta has argued that its basic approach to AI differs from most direct competitors (leaving aside Chinese companies). Mark Zuckerberg, Meta’s CEO, wrote a 14-page manifesto explaining why his company’s approach is better than most competitors’. It did not appear to help his position, nor did it address the fact that the market does not think much of his social media business, or his troubled approach to AI.
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